Child-Related Transfers, Household Labour Supply and Welfare

Guner, Nezih; Kaygusuz, Remzi; Ventura, Gustavo

Abstract

What are the macroeconomic effects of transfers to households with children? How do alternative policies fare in welfare terms? We answer these questions in an equilibrium life-cycle model with household labour supply decisions, skill losses of females associated to non-participation, and heterogeneity in terms of fertility, childcare expenditures, and access to informal care. Calibrating our model to the U.S. economy, we first provide a roadmap for policy evaluation by contrasting transfers that are conditional on market work (childcare subsidies and childcare credits) with those that are not (child credits), when both types can be means tested or universal. We then evaluate expansions of current arrangements for the U.S. and find that expansions of conditional transfers have substantial positive effects on female labour supply, that are largest at the bottom of the skill distribution. Expanding childcare credits leads to long-run increases in the participation of married females of 10.6%, while an equivalent expansion of child credits leads to the opposite (⁠2.4%). Expanding existing programs generates substantial welfare gains for newborn households, which are largest for less-skilled households. Expanding childcare credits leads to the largest welfare gains for newborns and achieves majority support.

Citation

Guner, N., Kaygusuz, R., & Ventura, G. (2020). Child-Related Transfers, Household Labour Supply and Welfare. The Review of Economic Studies, 87(5), 2290–2321. https://doi.org/10.1093/restud/rdaa011

• Journal Article Type: Article
• Online Publication Date: Mar 18, 2020
• Publication Date: 2020-10
• Deposit Date: Feb 23, 2023
• Journal: Review of Economic Studies
• Print ISSN: 0034-6527
• Electronic ISSN: 1467-937X
• Publisher: Oxford University Press
• Peer Reviewed: Peer Reviewed
• Volume: 87
• Issue: 5
• Pages: 2290–2321
• DOI: https://doi.org/10.1093/restud/rdaa011
• Public URL: https://durham-repository.worktribe.com/output/1180218